Underhand HMRC behaviour

Underhand HMRC behaviour

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We had a new client arrive with PAYE assessments for 2007/08, 2008/09 and 2009/10 last year.  He had two PAYE sources which had resulted in an underpayment.  We sent off a letter requesting relief under ESC A19 as HMRC had not acted on the PAYE information until early 2011.  6 months and several letters later, Self Assessment Returns are issued for 2008, 2009 and 2010.  Our insurers have advised us that the Returns have to be completed as they have been issued.  How mean and underhand is that????  i am fuming

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
08th Feb 2012 16:24

Pretty darn mean...

... have you thought about getting their MP involved?

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By refs8
08th Feb 2012 20:21

We have a simliar case

Be interested to see where this goes as we have a similiar case

 

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By Mouse007
08th Feb 2012 22:00

Come on; play the game (you have no choice)

If the only sources of income for each year are two PAYE jobs, for which you already have the information, then three year's tax returns should take less than half an hour to complete (unless of course you are doing it HMRC online). File the returns and send HMRC the bill, it's called play the game and then attack.

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Replying to Tim Vane:
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By Paula Sparrow
09th Feb 2012 10:33

Sorry Mouse, I think you missed the point

Our client has a case for the liabilities to be waived under ESCA19 because HMRC had suffcient information to be able to raise the 2007/08 assessment 3 years ago but failed to do so.  If our client completes the Self Assessment Returns then they are effectively accepting the liabilty and will have to pay the tax.  Completion of the Tax Returns is not the issue here.  I would have no problem dealing with it if it was just a client who had got behind with their affairs.  Our client has a legitimate claim and HMRC are pulling the rug from underneath him. 

A letter to his MP was my initial thought but I want to explore any other possible courses of action available through the Taxes Acts before I go down that route.

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By thomas34
09th Feb 2012 11:27

Storm in a Teacup?

Paula - you say that completion of the tax returns is not the issue but your original post suggested that HMRC were mean to have requested them (I'm unsure why your insurers are involved in the matter).

Filling in the tax returns changes nothing - if you accept that the assessments were accurate, there is a liability anyway. All ESC A19 does is give you an opportunity to apply for the forgiving of some or all of the liability.

You don't give us the benefit of knowing whether your claim relates to all the years concerned or what HMRC have said in response to your letters.

 

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By refs8
09th Feb 2012 14:24

Make a comment on the tax return

Personally, I would complete the tax returns and make a comment covering yourself in the white box saying completed but claim not due under ESCA19

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By Paula Sparrow
09th Feb 2012 17:10

@Thomas

Our insurers provide technical support and I asked for a second opinion from them as to whether there was any means of refusing to complete the Self Assessment Returns when our client has a case for relief under ESC A19.  They also confirmed that this is not an isolated incident.

HMRC had the information to enable them to raise the assessments as early as May 2008, but did not act on that information in any shape or form until 2011.  Our client should have been entitled to believe that his tax affairs were in order. This situation is covered by ESC A19. 

Self Assessment gives tax payers a degree of certainty over their liabilities and rights, whereas those outside of Self assessment (usually unrepresented taxpayers) do not have the same safeguards

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By Mouse007
09th Feb 2012 17:17

I don't think I missed anything

Merely confirming (by completing the tax returns) to HMRC the information that they have already had for n years does not change anything as far as you and your client are concerned regarding the ESC A19 claim. You are not denying liability and no rugs are being pulled.

Yes you are being mucked about, but it’s a game of tennis and the only question is: who is going to hit the net first? Send them your bill, it might not get paid but at least it puts the ball back in their side of the court.

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By IanRiley
10th Feb 2012 01:02

Come accross this tonight

Just seen a new client tonight who has received assessments going back to 2007/8 for car benefit that was not included in his code number ( he owes about £6,500). Prima facie case for ESC 19 as long as he can pass the 'should reasonably have known everything was OK' test.

He has been sent Self Assessment Returns for 2007/8, 2008/9 and 2009/10 for some reason.

Paula, you're not saying that the completion of SA Returns precludes an ESC 19 claim are you?

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By ACDWebb
10th Feb 2012 08:54

'should reasonably have known everything was OK' test

not wishing to be a glass half empty person (but I shall anyway); what did he think the effect of taking on a company car would be? Did he not notice that nothing changed with his salary? Did the employer not give him advice of benefits reported to HMRC each year?

I do have sympathy with a lot of people who suddenly find HMRC have finally pulled their finger out and issued demands for three years, but I do wonder at the claims of some that they thought everything was OK. New pensioners and those with multiple employments I understand, but someone who takes on a major benefit like a car and do not expect there to be some change I find a little harder to accept at times. Perhaps I am just getting old & grumpier

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Replying to SteveHa:
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By IanRiley
10th Feb 2012 09:06

Some sympathy with that ACDWebb.

In his defence, he seems to have been paying £2,400 personal pension contributions per year for the last 12 years whilst being a higher rate taxpayer and not made any sort of claim for the higher rate relief, so maybe he was genuinely clueless about tax. Additionally, he was in the motor trade and taking home a different car virtually every day (his P11D calls it the motor traders averaging scheme which I've not come accross before) so conceivably thought that that didn't count as a company car.

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By ShirleyM
10th Feb 2012 09:22

@ACDWebb

I know what you mean. There are some dizzy people who truly don't understand and don't realise the difference a tax code makes, but I don't think this applies to the majority of people. I often wonder if they would have noticed if their tax code hadn't gone up each year in line with the increase in personal allowance. I somehow think they would.

I had someone who recently retired come to me with a query over his numerous tax code notices. He didn't really understand them but had enough common sense to get them explained. People just can't be bothered to help themselves these days, especially if it means they pay less tax because HMRC have put their tax code higher than it should be.

Yes, I am getting old and grumpier, too :)

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By thomas34
10th Feb 2012 09:45

More Information

Nothing personal against the OP but the post still leaves us speculating about the case. "He had two PAYE sources which resulted in an underpayment" - what does that mean? Was his personal allowance used against both sources? Did he go into the higher rate band as a result of the miscodings? If so the tax returns will need to pick up any investment income and in itself is a reason to issue the returns.

Still no answers as to which tax years are claimed to be subject to ESC A19 or what defence if any HMRC have given to the ESC A19 claim.

 

 

 

 

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By Paula Sparrow
10th Feb 2012 11:50

ESC A19

Was requested against all the years.  The combination of the employments resulted in higher rate tax becoming due.  This should have been apparent from the PAYE returns submitted to HMRC as early as July 2008.  Their failure to act on 2007/08 until early 2011 caused a knock on effect for the next 2 years.  Their argument is that P14s are not relevant to PAYE codes.  That is what their manual says, but that stance is completely illogical since how else would you know whether to issue BR/D0 or whatever?  There was a thread on this exact same issue some months ago on here.

I am not convinced that ESC A19 would apply in self assessment cases unless HMRC delayed in processing the Returns or repeatedly failed to correct something that they had processed wrongly.  My concern is that Submitting the Self Assessment Returns gives a new starting point for HMRC and they can draw a line under the PAYE assessments. 

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By ACDWebb
10th Feb 2012 14:00

Take it to Tribunal

and hope you get Geraint Jones QC who sticks to type and tears HMRC a new one?

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Replying to Tim Vane:
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By IanRiley
10th Feb 2012 16:05

Problem is decisions on an Extra Statutory concession cannot be taken to a tribunal can they? There is no tax law to fight over. HMRC can make the rules up as they go along.

In Paula's case I've got some sympathy with HMRC. Pre 2009, they didn't have the systems to bring together numerous employments by one person. Now they do hence the bills going back x number of years.

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By ACDWebb
10th Feb 2012 16:31

No indeed

I wasn't being entirely serious. Sorry

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By thomas34
10th Feb 2012 16:53

ESC A19

On the basis of information given, ESC A19 would only apply to the 07/08 year as I understand the guidelines i.e. more than 12 months after the end of the tax year in which HMRC had the information (assessments were raised early 2011).

The normal procedure would be to give a code of 747L to what they thought was the main employment and BR to the other. They can't possibly know how much the taxpayer is going to earn with each employer.

No doubt taxpayers would gripe if HMRC gave a D0 code to the second employment and walloped them with 40% up front. I bet they'd notice any overpayments arising in that scenario.

 

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By ACDWebb
10th Feb 2012 17:51

IIRC

07/08 & 08/09 were the years when HMRC took a deliberate decision not to carry out EOY PAYE recs.

If they had  done the recs the (new) client might have become aware there was a probem significantly sooner and got onto correct codes sooner, reducing underpayments for at least 09/10.

Client would have been worse off by the increased tax but wouldn't be in the position to need to find large u/ps now.

If not A19 then hopefully extended time to pay/coding out adjustments over more than one year.

I am talking here of the OP where there were two sources (though how that came about and whether in view of the amounts it was reasonable for him to assume all was OK is another matter) and less so the later addition re car BiK - though I have a fraction more sympathy there with the additional info that there were many cars under the Motor Dealer scheme (a fraction only though)

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By stavros
13th Feb 2012 11:31

I had a similar situation with a client.  I wrote to the Revenue directly complaining that they were being underhand with the move to self-assessment especially where it was not a legal obligation and cited the Taxpayers' Charter.  All claims for ESC A19 to apply were accepted and the client is now out of the self-assessment system.

 

I would suggest writing to the Revenue again as it may just be that the automated machine has spilled out the returns with no actual thought given to the circumstances.  Typical Revenue in my eyes.

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By colin.powell
13th Feb 2012 12:24

Underhand HMRC behaviour

The father of a friend of my wife has had a demand for underpayment resulting from the commencement of payment from his RAF pension in 2008 . No deductions were made, no payslips issued or P14 supplied for any of the years.

He has been working at Vauxhall's and had hoped to retire completely later this year when he reached 65.

The Revenue are asking for £1,600.00 which he does not have, short time working at Vauxhall's does not help.

I have advised him to write to Paymaster General requesting at least P14's and asking why they did not deduct PAYE or advise HMRC of these payments until late 2011 when payslips suddenly started with deductions to cover the reclaimation of earlier years taxes.

Is it not reasonable to expect a Government Department to act properly when dealing with PAYE issues.

 

 

 

 

 

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By paddymillard
13th Feb 2012 15:56

Underhand HMRC behaviour

The issue of SA returns to PAYE taxpayers is usually the way HMRC like to tighten the screws by coverting arrears into a debt with all the expensive implications that brings.  It is a form of blackmail to wind up an ESC A19 claim when they are losing the argument.

Taxpayers already in SA rarely have much comeback under the concession because they have the opportunity of an annual reckoning, often through an agent.  It is the unrepresented PAYE taxpayer who suffers most from the circumstances which give rise to a claim for A19.  Putting him into SA does not destroy his eligibility for A19 to be considered because he was a PAYE payer at the time of the alleged underpayments.

We would need to know more from Paula about the miscodings - who issued them and what codes were actually operated.  ESC A19 should only be considered when employer error has been ruled out under Reg 72.

P14 information can be used when it affects the next year's code but HMRC try to keep up a smokescreen that is is not information.

If notification took place only in early 2011, then all years up to 09/10 can be covered by the concession and later years if HMRC repeated the error in two or more years.

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By steve2646
13th Feb 2012 17:24

Threaten an appeal

I would ask them for a formal decision in respect of the claim and at the same time tell them that if they are not prepared to allow the claim they should also give the full reason for their decision and inform you of how you can appeal against the decision.

I know that you already know how to appeal but the idea of this is that you will make your intention very clear to them.  This should hopefully result in your claim being referred to a more senior person who will hopefully realise that your appeal would be likely to succeed and he will therefore back down at an early stage. 

As some background to this I used to represent the revenue at appeals hearings and I grew very weary of appeals in cases like this being referred to me.  I would almost invariably return the appeal to the relevant manager and tell him that I was not prepared to take the appeal forward and that I didn't want appeals like this referred to me again.  This meant that they had to backtrack on the previous decision and allow the claim. 

Steve

 

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By Nick E Morgan
13th Feb 2012 19:14

HMRC is very clear about this...

or at least they were. They used to publish a very nice flowchart outlining how the principle should be put into practice. Then they took the flowchart away - perhaps too dangerous or just too clear? I managed to keep a copy which you can see here.

http://www.tax-hell.co.uk/2011/01/13/what-happened-to-the-esc-a19-flowch...

Basically if they had the facts and failed to act on them you are in a strong position.

Hope this helps

Nick

http://www.tax-hell.co.uk

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By markabacus
13th Feb 2012 20:10

ESC A19 - Employment plus military pension

Hi

I recently had a taxpayer come to me via another client with tax demands for 07/08, 08/09 & 09/10. He'd already written to HMRC but the declined the appeal in A19 reason being “we have no record of any information sent by you or a third party on which we failed to act”.

Chk'd the computations, no issue but 1st 2 yrs out of date, confirmed by our technical support service, had to ask as it was so obvious I thought I must be missing something.

I've written to HMRC, mid Dec, reply pending, pointing out that surely HM Paymaster and the NHS [employer] file P14's etc therefore they have all the info, they just didn't deal with it until early Feb 11, then issued a string tax codes that wld achieve next to nothing.

His pension pre dates 07/08 so who knows if these earlier yrs are correct.

His current coding is BR @ NHS and 747 for the pension. He's a higher rate tax payer so the issue continues even now.

 

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By taxbakbristol
13th Feb 2012 20:11

ESC A19

I had a very similar case and quoted ESC A19 and it was initially refused.I appealed and 6 months later my client received the money that HMR&C had deducted ( incorrectly) from a later repayment.

Just keep on at them and ask for a review.

Can I point out that my unbillable time on this was 5 hours . Im working for HMRC part time (unpaid) now and not pleased about it.

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Replying to stratty:
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By steve2646
14th Feb 2012 20:30

Dont bother keeping on at them and you dont ask for a review.  When you write to them in the first place all you have to do is make it very clear that you understand the legislation and tell them exactly what outcome you expect.

Any good inspector when dealing with customers will only make statements that he can justify to a tribunal.  If he blows it and over steps the mark even if he is that daft not to realise what he has done one of his bosses will or as a last check his appeal unit will tell him that they can not defend his position .  The trick to dealing with the revenue is to understand the legislation and not take any nonsense from them.  If you think that you are dealing with a sub-standard inspector phone him, explain your concerns and if that dosen't get the desired response ask to speak to his manager.   

   

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By Paula Sparrow
15th Feb 2012 11:54

That only works if

you have something that can be taken to a tribunal.  I do not believe that decisions under Extra Statutory Concessions are appealable. There is no point of law which can be relied upon as these rules are merely HMRC corner cutting

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By KTS
27th Feb 2012 11:37

Good luck ...
We had a similar case going on for a number of years whereby our client was not taxed for a 6 year period on his car benefit. In his case no coding was issued at all & as he hadn't received one previously he had no idea that this was unusual. In addition his coding was increased for the personal allowance each year automatically by his employer so was changing each year and didn't alert him, he received bonuses in a number of the years concerned that resulted in him paying significantly more tax than previously and in the first year the tax underpaid was less than £100 so would be difficult for anyone to notice.

Not only was ESC A19 refused after it was referred to "head office" but HMRC actually blamed the taxpayer for failing to notify a liability. They then decided not to penalise him as a "goodwill gesture" (ie that would have been the one thing we could have actually appealed under the legislation and taken to the commissioners as was). The claim was originally granted for the first year but was then removed when referred higher up the chain as having been incorrectly applied. We have never received an explanation for this other than the officer concerned failed to look at the reasonable belief test ... Despite referring specifically to it in one of her replies. My suspicion is that it became apparent that if they allowed the first claim then the repeated error rules would come into force and all years would apply.

To add insult to injury each year was at a level that individually could have been coded over time but this was refused as the whole was deemed to be too high. As the request for Returns was beyond the time limit for a paye taxpayer to keep records it was necessary to request HMRC to provide all of the information that was required for the Return, I think the irony was lost on them! They delayed doing so for a significant period of time and then charged interest and penalties for late submission and filing!

The adjudicator looked into the case and although they sympathised with our client they are only able to look at whether the Revenue have followed their stated guidelines and acted in accordance with them. The decision reached was that they had done so and the fault was with the taxpayer for failing to take any active steps to check his tax affairs. As the request for the information to complete the Return was initially made verbally and no record had been made by HMRC to correspond with our own notes the appeal against interest was also rejected.

We wrote to the clients MP who referred the case to the parliamentary ombudsman. We were advised that they would not look at it further as it had already been reviewed by the Adjudicator. During a telephone conversation with them we were advised that the Revenue had clearly stated that it was not reasonable for him to have believed his affairs were in order, despite never backing this up with any evidence or examples as compared to our detailed explanations as to why he believed it to be the case. The ombudsman told us at this point that obviously he was at fault because he did not actually do anything to check his position and there was no reason why he should not pay the tax due. Despite strong arguments it proved impossible to get the point across that this required the taxpayer to show greater understanding and care than that shown by HMRC which would appear wholly unreasonable within itself!

With regard to the unfair treatment of the client in having to make payment in one hit despite HMRC openly accepting the fault was theirs, we were again greeted with the reply that this was Revenue policy and had therefore been correctly applied and could not be altered.

A large basis for the decision reached by both the Adjudicator and the Ombudsman was based on HMRCs contention that the client had failed to notify. We gave very strong argument as to why we believed their interpretation of the legislation to be incorrect but could not get anyone to understand that Revenue interpretation did not carry the same weight as the actual wording of the legislation. Unfortunately it was impossible to appeal this point as HMRC had not issued penalties as outlined above.

Overall our experience of ESC A19 in a number of cases has been that the outcome is very much dependant on who actually receives the claim to begin with. With regard to the request for Returns you should not necessarily be put off by this as in more than one case we have discovered that these need to be submitted to quantify the liability before ESC A19 can actually be applied and we have had cases where it has not caused a problem. If the Revenue do dig their heels in, on the other hand, then unfortunately there appears to be little support for the taxpayer in being able to enforce an unlegislated concession even in the best of cases.

Good luck!

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By markabacus
25th Jan 2014 11:52

Case concluded, HMRC conceded

After 2 yrs of which it was with the adjudicators office for 18 months, phone call from them yesterday 25/1/14 to advise HMRC have conceded on all 3 years!

Great result, a shame it took so long and so much effort but we got there in the end.

Whoops, just realised I've stuck the above on to the wrong thread, shd have read the opener a bit more carefully but it was the same 3 yrs I was dealing with for a client.

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